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A long period without work at a young age can have a long-lasting effect on a person’s life chances, leading to a higher future likelihood of unemployment and lower future earnings. For this reason, UK policymakers should be particularly worried about the present level of youth unemployment. There are currently 868,000 young people aged 16–24 unemployed in the UK (580,000 if those in full-time education are excluded) and 247,000 of them have been looking for work for over a year.1 A study in 2013 found that around 700,000 young people are workless and have never had a job, and almost 1 million are classified as not in education, employment or training (‘NEET’).

Summary

While the last six or seven years have been particularly tough for the latest generation of young people, even before the financial crisis many of those entering the labour market for the first time were struggling to compete with older workers for jobs. In 2007, even if full-time students were excluded, someone aged 16–24 was more than three and a half times more likely to be unemployed than a person aged 25 and over – a ratio that was little changed at the beginning of 2014. It is unlikely, therefore, that even a full-blown economic recovery will solve the problem of youth unemployment in the UK.

The last Labour government and the Coalition have introduced a number of measures to tackle the youth unemployment problem, but too often these measures have not focused on the underlying causes of a tougher transition from education to employment. Perhaps they have failed to grasp the extent of the problem, or they have not had the imagination to come up with better solutions. More likely, though, the problem is one of cost. Despite declaring a reduction in youth unemployment to be a priority, neither Labour nor the Coalition has been prepared to make available significant additional resources to tackle it.

Analysis of the experience of young people across Europe shows how a strong workplace-based vocational education and training system, with high employer involvement, contributes more to a smoother transition from education to work and a lower rate of youth unemployment than anything else. In this respect, the UK system is some way from being the best in Europe. Improving this system, and increasing young people’s engagement with it, should be priorities.

Other lessons from Europe are as follows.

  • Changes in the structure of the economy have reduced young people’s ability to compete in the labour market because the skills system has not adapted fast enough to the pace of change.
  • Youth unemployment is lower in countries where the vocational route into employment through formal education and training is as clear as the academic route.
  • The quality of vocational education and training is crucial because it can raise the status of the vocational route in the eyes of employers and young people alike.
  • A high degree of employer involvement in the vocational education and training system results in lower youth unemployment.
  • Youth transitions are improved by information about the employment outcomes of various options and courses, as part of a good programme of careers education and guidance.
  • Work experience, combined either formally or informally with education, reduces a young person’s chances of being unemployed.
  • Second-chance schools and courses are an effective but expensive way of improving the employment chances of young people who leave compulsory education with few or no qualifications.
  • Employment regulation and minimum wages have little or no impact on youth unemployment.
  • Wage subsidies can be effective in lowering youth unemployment, but have high deadweight costs and can lead to substitution at the expense of other workers.
  • Work-first approaches in the benefit system are appropriate for some unemployed young people, but for most a combination of work experience and education will be more effective in securing lasting employment.

Recommendations

Employers are dissatisfied with the school-leavers who are applying to them for jobs, but fail to recognise that this is in no small part the result of insufficient links between firms and the education system. A large part of the problem arises because employers are not prepared to be sufficiently involved in young people’s training to ensure that they develop meaningful, useful skills. The best way to increase employers’ engagement is to have them take a financial stake in the success of the system. The government should do the following.

  • Encourage more coordinated employer involvement in the vocational education and training system through the development of strong employer-led bodies.
  • Introduce a youth apprenticeship levy to be paid at a national rate by all firms above a certain size.
  • Put in place mechanisms to allocate the funds raised by the levy regionally.
  • Empower employers, through combined authorities working with local enterprise partnerships, to use the proceeds of the levy to fund vocational education and training for young apprentices.
  • Ensure that a proportion of the funds are allocated to small firms.

Vocational education in England needs to be reformed so that it is held in higher esteem by employers and young people alike. This requires a greater focus on employability. As a pathway into work, higher-level vocational education should be seen as a valid alternative to a university education. This will require a great deal of change over several years, including the following.

  • Funding ‘knowledge centres’, along the lines of similar Dutch bodies, to recruit employers to participate more in vocational education and training.
  • Extending professional registration schemes to more sectors, led by employer organisations or by the government where public services are concerned.
  • Establishing a programme to attract skilled English and mathematics teachers to colleges.
  • Stopping the ringfencing of schools spending at the expense of 16–18-year-old education.

Policy on apprenticeships in recent years has been dominated by a preoccupation with quantity, putting quality at risk. Although the Coalition government has played this game, trumpeting increases in the numbers of apprentices in the last few years, it has also taken some steps to improve their quality. These actions, however, are insufficient. Apprenticeships should be seen by students and employers as a high-quality vocational route into work for young people. If this is to be the case, a number of actions need to be taken.

  • No one aged 23 or over should be allowed to start an apprenticeship (except in exceptional circumstances), and few apprentices should be aged 25 or over.
  • All apprenticeships should be at level 3 and above and should last for a minimum of one year; traineeships should be developed into pre-apprenticeships.
  • Apprentices should spend at least 30 per cent of their time doing off-the-job training. Spot checks should be carried out, and employers found not to be adhering to this rule should have to pay back any government funding they have received for the individuals affected.
  • After two years, the government should review its plan to fund apprenticeships through employers to ensure it has not led to a reduction in the number of firms offering them. If it has then the government should revert, at least partially, to a system of central or preferably local funding.

In those European countries that have low rates of youth unemployment, careers education and guidance play a crucial role in ensuring a smooth transition from education to work, but it has been badly neglected in England. To rectify the situation, additional funds should be found to enable a number of steps to be taken.

  • Careers education should be embedded in the curriculum from primary school onwards, and for pupils in years 7, 8 and 9 should involve a greater degree of contact with local employers.
  • The National Careers Service should be expanded to allow it to offer more support to schools.
  • Careers guidance – and some careers education – should be provided by specialist advisers rather than teachers.
  • Every secondary school should be required to appoint a full-time careers officer responsible for careers education and guidance, and for liaison with local employers.
  • All students should have a face-to-face careers interview with a specialist adviser in year 9 and again in year 11, to help them make the crucial choices they face in those years.
  • Careers advisers should be made responsible for getting local employers more involved in schools, and for providing students with up-to-date information on education and training options and on opportunities in the local labour market.

A distinct work, training and benefits system should be established for young people. Its main features sould be as follows.

  • A youth allowance, which would replace all existing benefit payments and would be available to all young people aged 18–21 years old in further education and training or who are actively looking for a job.
  • A youth job guarantee, which would provide paid work experience to any young person aged 18–21 years old who has been out of work and looking for a job for six months.
  • A personal adviser, who would help young people to find work or identify the most appropriate further education and training opportunities.
  • Decentralisation of responsibility for many elements of the school-to-work transition to London and the core cities, together with greater accountability.

1 All these figures refer to Q1 2014.